Sales Tax Exposure in Frisco, Texas

What is Sales Tax Exposure in Frisco?

Sales tax exposure in Frisco arises when businesses fail to properly comply with local, state, and district tax rules. Common causes of exposure include misapplying nexus rules, failing to account for special district taxes, or incorrectly calculating tax rates. These errors can result in back taxes, penalties, and audits for businesses in Frisco.

Understanding Sales Tax Nexus in Frisco

• Physical Nexus: A business has physical nexus in Frisco if it maintains a physical presence such as an office, employees, inventory, or property within the city.
• Economic Nexus: Frisco, like the rest of Texas, has economic nexus laws. If a business makes over $500,000 in sales within Texas, it may be required to collect and remit sales tax, even if it doesn’t have a physical presence in Frisco.

Special Tax Districts in Frisco

Frisco is part of several special purpose districts that impose additional sales taxes. These districts may include:

• Transit authorities
• Development and improvement districts
• Municipal utility districts

Each of these districts can add a percentage to the base sales tax rate, increasing the total tax burden for businesses in Frisco. Businesses must be aware of which special districts apply to their location to avoid under-collection.

Frisco is affected by special tax districts. Visit our Special Tax Districts page for details.

Sales Tax Rates in Frisco

• Texas State Sales Tax: 6.25%
• Frisco City Sales Tax: 2.00%
• Combined Sales Tax Rate: The combined sales tax rate in Frisco can be as high as 8.25% in certain areas, depending on special district participation.

Businesses must calculate the correct sales tax rate based on the specific location of the transaction in Frisco.

Use Tax Exposure in Frisco

Use tax applies when businesses purchase goods or services from out-of-state vendors who do not collect Texas sales tax. In Frisco, businesses may face use tax exposure in these scenarios:

• Purchases of equipment, machinery, or inventory from out-of-state vendors.
• Software and digital tools used by Frisco-based teams but purchased outside Texas.
• Transactions that occur across city or county lines, where sales tax may not have been collected.

Businesses in Frisco may face use tax exposure. Visit our Use Tax page to learn more.

Common Sales Tax Mistakes in Frisco

Businesses in Frisco often make these mistakes, leading to sales tax exposure:

• Relying on ZIP codes instead of determining the correct jurisdiction boundaries for tax calculation.
• Misapplying nexus rules by assuming no nexus because the business does not have a physical location in Frisco.
• Ignoring special purpose districts and failing to account for district taxes.
• Misapplying origin vs. destination sourcing rules for taxable sales.

These errors can accumulate over time, leading to significant tax liabilities. Since sales tax is jurisdiction-driven, businesses should understand how requirements apply across Collin County to help reduce exposure.

How Sales Tax Exposure Builds Over Time in Frisco

Sales tax exposure in Frisco typically doesn’t result from a single mistake but from multiple errors that build up over time. These errors can lead to audit risks and larger liabilities down the road.

Common causes of growing exposure include:

• Incorrect tax rate application.
• Failure to account for special district taxes.
• Missed nexus determinations.
• Delays in registering for sales tax permits.
• Incomplete reporting of use tax.

Related Resources

• Learn more about sales tax exposure in Dallas, Fort Worth, and Plano.
• For more on special tax districts in Frisco, visit the Special Tax Districts page.
• Check your sales tax exposure in Frisco with our Sales Tax Exposure Calculator.